Glossary of Commercial Real Estate Terms 

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From the REALTORS® Commercial Alliance



Glossary of Commercial Real Estate Terms

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The amount of inventory or units of a specific commercial property type that become

occupied during a specified time period (usually a year) in a given market, typically reported

as the absorption rate.

Accumulated cost recovery

Total cost recovery deductions taken throughout the holding period of a property.

Active income

Income from salary, wages, tips, commissions, and activities in which the taxpayer

materially participates. Also see passive income.

Add-on factor

The ratio of rentable to useable square feet. Also known as the load factor and the

rentable-to-useable ratio. Also see efficiency percentage. Formula:

Add-on factor =Rentable square feet

Useable square feet

Add value

Fourth stage of four-stage transaction management process pertaining to a transaction

manager’s planning, effort, and continual contact with key decision-makers, investors, and

users, as well as contact with ancillary professionals. This ongoing process allows for

feedback, establishes a network for problem solving, provides a means to offer additional

services to the client, and enhances the transaction manager’s preparedness for the next


Adjusted basis

The original cost basis of a property plus capital improvements, less total accumulated cost

recovery deductions, and partial sales taken during the holding period.


See annual debt service.

Agglomeration economies

Cost reductions or savings that come about from efficiency gains associated with the

concentration or clustering of firms/producers or economic activities and the formation of a

localized production network.


The repayment of loan principal through equal payments over a designated period of time

consisting of both principal and interest.

Annual debt service (ADS)

The total amount of principal and interest to be paid each year to satisfy the obligations of a

loan contract.

Annual percentage rate (APR)

The true annual interest rate payable for a loan in one year taking account of all charges

made to the borrower, including compound interest, discount points, commitment fees,

mortgage insurance premiums. It also takes into account the time at which the principal is

repaid (especially when payments of principal are made in installments throughout the year,

but interest is charged at the beginning of the year), but not the actual expenses incurred

by the lender in making the loan and recharged to the borrower. (Encyclopedia of Real

Estate Terms 2nd Edition, Damien Abbott)


Regular fixed payments or receipts over a designated period of time.


An investment’s increase in value.



 Glossary of Commercial Real Estate Terms


Glossary of Commercial Real Estate Terms